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Commodities Briefing 02.Jul 2013

Posted on 02 July 2013 by VRS |  Email |Print

One of the most contentious debates in finance is whether investors should consider including an allocation to commodities in their portfolio. The reason for considering including commodities is that they act as a form of portfolio insurance.
Commodities have been shown to hedge the risks of unexpected inflation, tending to perform best during periods of rising inflation, when nominal return bonds do poorly. Commodities also have been shown to hedge supply shocks that hurt stock returns (such as the oil embargo of 1973-74), though not demand shocks to the economy (such as the financial crisis of 2008). ……………………………….Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

Investors who have plowed some $400 billion into raw materials markets over the past 10 years are accelerating efforts to change their strategies, if not their allocations, on the growing belief the commodities “supercycle” has come to an end.
While pension funds and other institutional investors have been quick to bail on gold as bullion fell deeper into bear market territory in the second quarter, they have yet to abandon other markets like oil and metals en masse, asset allocation experts and analysts say………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

Commodities traders and price reporting agencies could see their greatest fears realised after the European Commission outlined new proposals for the regulation of commodities benchmarks. Market participants say these threaten to make the market more opaque.
The proposals, which include holding commodities price contributors liable for their submissions, are part of the wider EC draft regulation on benchmarks, seen by Financial News, due to be published in the coming months………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

Rather than complain, the boss of HKEx should be happy higher prices are boosting turnover on his subsidiary, the London Metal Exchange. Charles Li Xiaojia is unhappy about conditions in global commodity markets. In his blog last week, the chief executive of Hong Kong Exchanges and Clearing bemoaned China’s lack of influence on global commodity prices.
At first this sounds like a bizarre thing to say. Ask any commodity trader, and he will tell you it was China’s ballooning demand for resources that drove the long bull market which saw key industrial commodities such as copper more than quadruple in price over the first decade of this century………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

Crude output from the OPEC oil cartel fell to 30.1 million b/d in June from 30.4 million b/d in May, a drop of 300,000 b/d, the US Energy Information Administration estimates. Average output of about 30.3 million b/d over the two months was some 800,000 b/d below the May-June 2012 average of 31.1 million b/d, the agency said.
Volumes from OPEC kingpin Saudi Arabia were steady in June at 9.4 million b/d. Iranian output was also unchanged at 2.8 million b/d. Iraq, now OPEC’s second biggest producer after Saudi Arabia, boosted output to 3.2 million b/d in June from 3.1 million b/d in May………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

OPEC production rose for the third straight month in June, as increased production from Saudi Arabia offset a decline in Libyan output, a Dow Jones Newswires survey of industry sources and analysts showed.
Crude-oil production from the Organization of Petroleum Exporting Countries averaged 30.678 million barrels a day in June, from 30.575 million barrels a day in May. The rise in production was largely the result of an increase of nearly 200,000 barrels a day in Saudi Arabia, as well as a small uptick in output in Nigeria, Iran and Kuwait………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

OPEC crude output has fallen in June due to disruptions in Libya and Nigeria, a Reuters survey found, inadvertently bringing supply closer to the organization’s target. Supply from the Organization of the Petroleum Exporting Countries ( OPEC) has averaged 30.38 million barrels per day (bpd), down from a revised 30.46 million bpd in May.
This is according to the findings of shipping data and sources at oil firms, OPEC and consultants. The survey shows violence is making African producers OPEC’s weakest supply link and the ambitious plans of Iraq, its second-largest producer, to expand exports are facing headwinds………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

Assumptions about the price of oil strongly influence forecasts of oil demand and supply such as Oil & Gas Journal’s Midyear Forecast. But what influences the price of oil? The US Energy Information Administration addresses that question in its Energy and Financial Markets Initiative. Its answers are varied and complex.
EIA’s analysis covers not only physical fundamentals such as energy consumption, production, inventories, and geopolitical risks but also financial markets, including futures trading, commodity investment, currency-exchange rates, and equity values………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

Demand for oil and gas in the US will climb this year, bolstered by improving economic conditions. US crude oil and lease condensate production is expected to rise 13.8% to 7.4 million b/d in 2013. The rise in production will more than offset the increase in demand, pushing imports down.
Worldwide oil demand will grow 0.9%, and global oil supply will climb 0.8%. Demand from China will post the largest increase. North American members of the Organization for Economic Cooperation and Development—Canada, Mexico, and the US—will contribute most of the output growth. Oil supply from members of the Organization of Petroleum Exporting Countries will slip to an average 37.3 million b/d this year from 37.6 million b/d last year………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

The price of oil is determined not by the overall amount of oil produced and consumed but by whether slightly more oil is being produced than consumers want to buy or slightly less. If slightly more is being produced then stockpiles will rise larger and larger over time.
Stockpiles can’t keep growing forever and as they build larger and larger, vendors become eager to sell and cut the price. Similarly, as stockpiles shrink closer to zero, vendors become nervous that they will run out and raise the prices………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

Oil prices have mostly resisted the commodity sector sell-off sparked by China economy concerns and chatter over reduced Federal Reserve asset purchases. WTI crude has been stuck between $90 and $98 a barrel for most of the past six months.
But Barclays reckons the oil market has become too complacent and greater volatility may be on the way. “We think now is an appropriate time to buy medium-term (three- to six-month) options on WTI futures, for a few reasons,” say analysts at the bank………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

Barclays has lowered its gold price forecast for 2013 citing a weak second quarter, a recent sell-off and lack of investment buying. The bank expects an average gold price at $1,393 per ounce in 2013 with a predominantly weak third quarter. The bank earlier held a forecast of $1,483.
“Gold has been exposed to further downside following firmer equity markets, a firmer dollar and firmer-than-expected U.S. housing data, which has compounded the weakness after the hawkish Fed press conference,” Barclays analysts said in a note………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

Given how significant mining strikes in South Africa were for decreasing platinum prices, the same effect may soon be in store for gold. The hits just keep coming for gold. As markets finally calmed after Bernanke’s announcement of imminent tapering from the Fed, gold continues to get slaughtered.
With many predicting the metal to eventually lose its grip on the quadruple digit levels, investors are trying to properly time the bottom. The problem is, a number of gold’s movements have seemed to defy all logic with harsh sell-offs coming off of little fundamental news or changes; emotional trading has taken hold………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

Every year Ronni Stoeferle, formerly of Austria’s Erste Bank and now with specialist advisors, Incrementum AG in Leichtenstein (although remaining a consultant to Erste Bank), produces one of the most comprehensive analyses of the global gold market available under the ongoing title – ‘In Gold We Trust’.
Stoeferle is very much a believer in gold as a monetary metal rather than as a commodity and notes that gold analysis should be the preserve of those who study monetary matters rather than those who specialise in commodities which is the normal pattern amongst the major financial institutions………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

As they say on Wall Street, “They don’t ring bells at the top,” and they usually don’t give you a phone call at the bottom, either. Many heads have rolled trying to call this recent near two-year downdraft in gold in terms of bottom callers, mine included. I thought we would never get much below 1440 or so from the 1923 highs, but alas, we all know we did.
What makes me think that last week put in the final gold low for the bear cycle? Too many things to mention, but based on the work I do, it’s enough to give me some chutzpah to make this call now. The 1180s are very close to a classic ABC 61.8% Fibonacci retracement of the prior 34-month bull cycle. ……………………………….Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

The gold price’s plunge to a three-year low has left thousands of investors nursing losses on funds that back the precious metal. Bullion traded below $1,200 an ounce last week for the first time in four years. It had become popular with investors as a hedge against inflation. The fear was that the money printing enthusiasm of central banks would pump up price pressure.
But the indication from the Federal Reserve that its stimulus programme would at some point end, although stating the obvious, sent stock markets and gold prices falling………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

Precious metals, particularly gold and silver, were hit hard last week as investors continued to re-assess the outlook for US monetary policy. The sharp rise in US real interest rates has been the main trigger for the correction in gold and silver prices.
In our view the reaction of bond markets to Fed comments has been overdone, and ultimately real interest rates will fall back from current levels. It appears that the Fed agrees that bond markets have over-reacted and key FOMC members appear to be trying to talk rates back down now. With gold speculative shorts at all-time highs and market sentiment almost unanimously negative, we believe there is scope for a price reversal in the coming weeks and months. Silver should benefit from a gold price rebound………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

It’s obvious to anyone who follows the market that the precious metals have dropped by a significant amount this year. At this point, many new investors who have been on the sidelines and were thinking about precious metals as a possible investment opportunity are wondering if this is the right time to begin dipping their toes into the pool.
Let’s take a look at the fundamentals of one of the precious metals, platinum, to determine if there is an investment opportunity………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

The gold and silver miners have been hammered down to historic 1999 lows, while the U.S. banks and U.S. dollar reach new heights. This is a great opportunity for value investors to enter the mining sector at possibly the ground floor of a commodity supercycle.
Many amateur investors may be prematurely assuming that all is well with the global economic picture. The fine tuning of the economy by the Central Banks and specifically Ben Bernanke appears to have been a major success to the masses. On the other hand are astute investors who have learned from history and are aware of the financial risks stemming from currency devaluation………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

Wheat futures slid to a one-year low, extending the longest slump since 2005, on signs of record global output and reduced demand for supplies from the U.S., the world’s biggest exporter.
Farmers from Australia to Canada will produce a combined 683.1 million metric tons in the year that starts today, up 4.3 percent from the prior 12 months and the highest ever, the International Grains Council said today. Prices have tumbled 16 percent this year as importers shun U.S. supplies for cheaper grain from Russia and Ukraine, and signs of a record Midwest corn harvest in 2013 erodes demand for wheat in livestock feed………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

Although the foreign exchange market is often billed as a banker’s game, currencies can sometimes be great diversification for a portfolio that might have hit a bit of a rut. It’s a market that can also offer tremendous opportunity when other global forums enter the doldrums.
As a result, knowing a little bit about forex, and the fundamentals behind it, can make significant additions to any trader, investor or portfolio manager’s arsenal. Let’s take a look at eight currencies every trader or investor should know, along with the central banks of their respective nations………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

The sell-off in commodity currencies over the past two weeks has hit the Norwegian krone particularly hard, but according to one strategist the decline is “overdone” and the krone is set for a rebound.
Since June 17, the krone (NOK) has weakened 6.5 percent against the dollar to 6.0795 and 4.11 percent against the euro to 7.9325 amid concerns that the U.S. Federal Reserve would scale back its stimulus program and after weakness in the Norwegian economy prompted the central bank to delay a rate hike………………………………..Full Article: Source

Posted on 02 July 2013 by VRS |  Email |Print

The world’s biggest carbon market, the European Union Emissions Trading Scheme, is now widely regarded as a basket case. The price of a permit to pump carbon into the atmosphere has collapsed. Europe’s parliament is to vote on an emergency rescue imminently – though few expect it to succeed.
Yet new carbon trading schemes are being set up around the world, from Australia to Kazakhstan. Even China, the world’s biggest emitter, has just set up a pilot. If the EU market is such a shambles, how come?……………………………….Full Article: Source

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